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Working Paper: The Energy Efficiency Paradox: A Case Study of Supermarket Refrigeration System Investment Decisions

Paper Number: 2015-03

Document Date: 6/2015

Author(s): Heather Klemick, Elizabeth Kopits, and Ann Wolverton

Subject Area(s): Air Pollution; Energy; Benefit-Cost Analysis

Keywords: energy efficiency paradox; market failures; technology investment barriers; supermarkets

Abstract: Commercial buildings offer opportunities for companies to reduce energy use that, according to engineering analyses, should save them money while also lowering greenhouse gas (GHG) and other polluting emissions. Supermarket refrigeration is one sector with ample energy-efficiency and emission-reducing investment options. This study explores the evidence of an energy efficiency paradox for supermarket refrigeration technologies that are estimated to reduce energy and emissions while providing net cost savings for firms. We conduct interviews and focus groups with representatives from 44 small, medium, and large US supermarket chains. We focus on the refrigeration system given its dominant role in determining store electricity consumption and GHG emissions. Consistent with the economics literature on the energy-efficiency paradox, we distinguish between market failures, behavioral anomalies, and other factors not accounted for in typical NPV or payback calculations for supermarket refrigeration technologies. Imperfect information and uncertainty about the performance of new technologies were the most pervasive barriers among participants, though split incentives between firms and contractors or employees, liquidity constraints, tradeoffs with other valued system attributes like reliability and customer appeal, and certain behavioral anomalies also play a role among some firms.

Published: Klemick, Heather, Elizabeth Kopits, and Ann Wolverton. "Potential Barriers to Improving Energy Efficiency in Commercial Buildings: The Case of Supermarket Refrigeration," Forthcoming Spring 2017 Journal of Benefit-Cost Analysis

This paper is part of the Environmental Economics Working Paper Series.

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